The Bank of Uganda Deputy Governor, Dr. Louis Kasekende has urged government to nurture local based businesses to reduce on over reliance on foreign companies, arguing that any slightest sign of instability can adversely affect the economy.
He made the remarks while presenting at the International Monetary Fund (IMF)’s April 2019 Regional Economic Outlook for Sub-Saharan Africa at Sheraton Kampala Hotel on May 22, 2019.
“… we must critically undertake steps to nurture and expand domestic or regional firms to underpin the structural transformation drive of our economies. Such steps may include improving the financial and business skills of owners and managers of the small and medium sized domestic firms. Otherwise, we risk placing our growth prospects fully reliant on foreign capital flows that can reverse at the slightest sign of instability,” Kasekende said.
Commenting about the rising debt levels in Africa, Kasekende said: “It is worrying that almost 16 countries are categorized in high risk and 7 of these are in debt distress. It is worrying because debt restructuring through debt relief is unlikely more so, because we have now a substantial portion of the debt being contracted from private sector lenders and not the multilateral lenders that offer highly concessional terms and a longer payment horizon. There is therefore a major risk of debt default which could undermine stability, future access to international financial markets and growth objectives.”
He noted that although Ugandan remains at low risk of debt stress, the country’s revenue effort is not yet at a level that allows much room to take on much higher debt, especially commercial debt, given its implications on debt servicing costs.
He further noted that successful resolution of banks, even those considered systemically important, is good for financial stability and ultimately having a financial sector that properly executes its financial intermediation role to aid growth.